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Recap of the 11/27/2018 commission meeting

Posted on November 28, 2018 by CPratt/Public Affairs

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Fiber to get $12.6 million more in 2019 budget

Commissioners Tuesday approved a $292.4 million budget for 2019 that includes a 2-percent increase in retail electric-rate revenue and $12.6 million in new funding to speed build-out of the fiber-optic network to the 30 percent of Grant County residents who still don’t have access.

Together with the new injection of fiber funds, the total fiber budget for 2019 totals $18.4 million next year for expansion, maintenance and operation and new customer hookups (39:00 on the commission audio)

Commissioners expressed their support for expanding fiber to all country residents by increasing the 2018 fiber budget by $7 million. Future fiber budget expansions will vary, depending on the PUD’s financial performance, year to year, they agreed.

Following a combination of customers’ clamor for fiber and Grant PUD’s improved financial forecast, commissioners seek to speed total fiber build-out from an estimated 10 years to approximately five years.

Russ Brethower, senior co-manager of Wholesale Fiber, said the extra $12.6 million could enable build-out in 2019 to off-island Crescent Bar; the rest of Beverly and Schawana; Sunland Estates; the rest of the Coulee City area; Blue, Park and Alkali lakes; Ancient Lake and White Trail area; the McConihe, Neppel and Stonecrest areas; the rest of the Moses Lake base area and Kittleson, Road N Industrial and Wheeler areas.

A more precise timeline for build-out to these areas should be ready by the end of April 2019, Brethower said.

Total expenditures in the 2019 budget include $144.6 million for capital expenses that include fiber, substation expansion, fleet upgrades and turbine/generator rehab at Priest Rapids and Wanapum dams.

Top revenue sources are projected at $211.3 million from retail power sales — including $4 million from the 2-percent rate-revenue increase — and $49.4 million from wholesale and other power sales. Annual rate increases are expected to decline to 1 percent or less in 2020.

The budget forecasts a bottom-line “change in net position” of nearly $58 million, which will be reinvested into machinery and system upgrades.

Grant PUD analysts expect the utility to end 2019 with unrestricted reserves of $111.4 million and total debt of just under $1.2 billion. Annual payment on this debt is budgeted at $87.5 million in 2019. No new debt was issued in 2018. Financial staff are studying the possible need to issue between $30 million and $40 million in new debt in 2019.

If additional debt is needed in 2019, it would likely happen sometime in April, when some existing, short-term debt will be refinanced, Bonnie Overfield, senior finance manager, told commissioners.

The financial forecast for 2019 includes a reduction from 60.74 percent to 60 percent of Grant PUD’s debt-to-net-plant (asset) ratio. This ratio is expected to decline to 56 percent in 2023. The utility’s “debt service coverage” — the amount of cash flow available to pay debt service — is expected to climb to 1.91 by the end of 2019 and increase to 1.99 in 2023.

Commissioners Tuesday proposed a five-year employment contract for General Manager Kevin Nordt, citing his extensive knowledge of the utility business, success in managing Grant PUD and high regard he enjoys among elected officials and industry forums (2:07:19 on the commission audio).

Commissioners plan to vote on the proposed contract at their Dec. 11 meeting.

“We want to express a commitment between the commission and Kevin and to the community that this is intended to be lasting and durable,” Commissioner Bob Bernd said.

Commissioner Tom Flint added, “Kevin’s been a long-term employee. Previous to that he comes with excellent knowledge of the utility and is received very well nationally and in Olympia and other public power forums. He’s represented us well. We’ve kind of had Kevin on a probationary status for quite a while. And if you will use the Dave Ramsey phrase, he’s brought our debt snowball down to a manageable level. Moving forward I think it’s appropriate for us to have him represent the utility on a more permanent basis.”

“We’re on a good path,” said Commissioners Larry Schaapman. “Kevin, with his goals he’s brought before the commission the last few years, has really performed well and outdone himself. We’re starting to see the fruit from what he’s implemented. I’m proud to embrace this document to make sure we don’t lose him. He’s a valuable asset.”

Commission President Terry Brewer attended the meeting by phone Tuesday, but also expressed his support for the contract.

Nordt was hired in November 2004 as Mid-Columbia coordinator. He became director of Power Management in 2008, Finance director in 2011, chief financial officer in 2012 and general manager in June 2016.

Commissioners also:

— Approved a new slice contract with Avangrid Renewals

The three-year contract sells a 10-percent slice of the generation output of Wanapum and Priest Rapids Dam to Avangrid Renewables. The contract will begin with the wind power company, on Jan. 1, 2019.

The deal is beneficial to both parties. For Grant PUD it locks in a price of $4.19 per megawatt hour above market price, while Avangrid gets the carbon-free energy and the ability to serve its customers when its own windmills aren’t generating.

The 10-percent slice is from Grant’s 63.31-percent share of the Priest Rapids Project. As part of the contract Avangrid must return to Grant PUD the power it uses. The company would replace the contracted hydropower with power it buys on the regional wholesale market, which is a mix of carbon-free and carbon-emitting generation.

Grant PUD’s slice sales have proven to be part of a successful strategy to reduce risk and maximized the value of Grant PUD’s hydropower operations. The benefits include the elimination of year-to-year water risk, stable and predictable revenue and increased value for non-carbon attributes.

The agreement also stipulates that if the state enacts a tax or fee on carbon during the agreement, the power returned to Grant PUD from Avangrid must be carbon-free. (Pages 30- 86 of the commission packet and 2:02:15 of the commission audio).

— Heard a request to approve a five-year contract with North Sky Communications, LLC for Fiber Optic Design and Construction. The contract would start in January and run through 2023 at a price of $10 million. The existing three-year contract, currently with North Sky Communications, LLC will expire at the end of December.

A request for proposals was advertised for the contract with five companies providing proposals to do the work. Based on the selection criteria for the project, North Sky Communications was unanimously agreed by the district’s selection committee to be the top choice.

The Wholesale Fiber group recommends moving from a three to a five-year contract in an effort to maintain a stable contract workforce while also reducing the overall procurement costs. (38:00 of the commission audio)

- Approved a resolution updating the non-union salary plan and the non-bargaining compensation policy. The plan was developed following research of a mix of local, regional and national market salaries many of which were utilities. This does not increase any salaries but simply adjusts the salary plan which has not been adjusted since 2016. (Pages 10- 20 of the commission packet and 1:58:00 of the commission audio)

-Approved a motion extending an existing contract with Power Engineers, Inc. by one-year to expire at the end of 2019 while also adding $300,000 to the existing agreement. The company provides electrical engineering services that support the Wanapum and Priest Rapids unit controls project. The rates for the 2019 extension are being held to the current 2018 rates. (Pages 25- 29 of the commission packet and 2:00:30 of the commission audio)

-Approved a change order request that allows RH2 Engineering Services to continue support of the planning and design with the water, sewer/septic, and storm system improvements through 2020, a two-year extension to their current contract. Additional work as part of the change order will also allow ongoing support for additional planned projects. In addition to the extension of the contract, the overall cost will increase by $820,000. (See details of the contract extension see pages 87-92 and 2:03:30 of the commission audio)

-Approved a change order to an existing contract with Halme Builders, Inc. to provide the finishing touches to the outbuilding that burned during the Central Ephrata Substation fire in February 2017. The change order increases the contract length by 28 days and $16,034.12 (Pages 93- 99 of the commission packet and 2:04:40 of the commission audio)